Body Corporate for Sanderling At Kings Beach v Samsakopoulos (No.2)
[2020] FCCA 1909
•15 July 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BODY CORPORATE FOR SANDERLING AT KINGS BEACH v SAMSAKOPOULOS (No.2) | [2020] FCCA 1909 |
| Catchwords: BANKRUPTCY – Application by a former trustee of a bankrupt's estate for remuneration, costs, expenses and charges of the administration – where sequestration order set aside upon a review pursuant to s.104(2) of the Federal Circuit Court of Australia Act 1999 (Cth) – whether Court has power to make an order for former trustees remuneration, costs, expenses and charges of the administration where no order pursuant to s.153B of the Bankruptcy Act 1966 (Cth) annulling the bankruptcy made |
| Legislation: Bankruptcy Act 1966 (Cth), ss.153, 156A(3)(a) Federal Circuit Court of Australia Act 1999 (Cth), ss.102(2), 102(3), 104(2), 104(3) Federal Circuit Court Rules 2001, r.20.01 |
| Cases cited: Adsett v Berlouis (1992) 37 FCR 201 Body Corporate for Sanderling at Kings Beach v Samsakopoulos [2019] FCCA 2133 Flint v Richard Busuttil & Co Pty Ltd (2013) 216 FCR 375 |
| Applicant: | BODY CORPORATE FOR SANDERLING AT KING BEACH |
| Interim Applicant | WILLIAM ROLAND ROBSON |
| Respondent: | VICTORIA SAMAKOPOULOS |
| File Number: | BRG 771 of 2018 |
| Judgment of: | Judge Jarrett |
| Hearing date: | By written submission |
| Date of Last Submission: | 23 June 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 15 July 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Topp |
| Solicitors for the Applicant: | Strata Legal Queensland |
| The Respondent appeared in person |
ORDERS
The application filed on 11 December, 2019 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 771 of 2018
| BODY CORPORATE FOR SANDERLING AT KINGS BEACH |
Applicant
And
| VICTORIA SAMAKOPOULOS |
Respondent
REASONS FOR JUDGMENT
By the present application, filed on 11 December, 2019 Mr William Robson, the former trustee in bankruptcy of the estate of the respondent in these proceedings, seeks the following orders:
1. Orders pursuant to section 90-15 of Schedule 2 of the Bankruptcy Act 1966 (Cth), or in the alternative section 30(1)(b) of the Bankruptcy Act 1966 (Cth), and section 15(a) of the Federal Circuit Court Act 1999 (Cth) that:
(a) the Applicant and the Respondent pay, in such proportions as this Honourable Court thinks appropriate, the remuneration, costs and expenses of the Interim Applicant of administering the former bankrupt estate of the Respondent in the sum of $53,104.98 (including GST);
(b) to the extent that this Court orders by paragraph (a) above that the Respondent pay any proportion of the sum stated therein, the Interim Applicant be entitled in the first instance to indemnify himself for that proportion from the assets of the former bankrupt estate of the Respondent held by him pursuant to the orders of 1 November 2018; and further, that all such assets be charged with the payment of that proportion; and
(c) subject to paragraph (b) above, the Interim Applicant forthwith cause the legal title in the assets of the former bankrupt estate of the Respondent held by the Interim Applicant to be transferred to the Respondent.
2. The Applicant and the Respondent pay, in such proportions as this Honourable Court thinks appropriate, the Interim Applicant’s costs of this interim application to be taxed or otherwise as agreed.
The issue raised by this application is whether this Court, when setting aside a sequestration order on a review of a registrar’s decision pursuant to s.104(2) of the Federal Circuit Court of Australia Act 1999 (Cth), has power pursuant to s.104(3) of that Act to make orders permitting a former trustee in bankruptcy to recover his remuneration and costs, charges and expenses associated with administering the estate in bankruptcy between the time of making the sequestration order and the date upon which the sequestration order is set aside.
For the reasons that follow, I am of the view that s.104(3) of the Act does not supply power to make the orders sought by Mr Robson in this case.
Background
Most of the following background is uncontroversial. It is taken from the written submissions delivered on Mr Robson’s behalf. In my view, it is an accurate recitation of the background facts.
On 1 November, 2018 a Registrar of this Court heard and determined a creditor’s petition presented by the applicant for the sequestration of the respondent’s estate in bankruptcy. A sequestration order was made on that date. Mr Robson was appointed as the trustee of the estate by operation of s.156A(3)(a) of the Bankruptcy Act 1966 (Cth).
No application for a review of the orders made by Registrar Buckingham on 1 November, 2018 was made within the time limit stipulated by r.20.01 of the Federal Circuit Court Rules 2001 (Cth). Between 2 November, 2018 and 15 April, 2019 Mr Robson performed work in the administration of the respondent’s estate in bankruptcy.
On 31 March, 2019 the respondent commenced an application to review the decision of the registrar to make a sequestration order against her estate. That application was commenced well outside of the time limited for that purpose by the Federal Circuit Court Rules 2001 (Cth). But that issue did not seem to trouble any of the parties.
Mr Robson was served with the application for review on 15 April, 2019. He swears that between 15 April, 2019 and 12 July, 2019 he continued to perform work fulfilling the duties required of him under the Bankruptcy Act.
The application for review was heard on 12 July, 2019. The applicant, the respondent and Mr Robson appeared and made submissions on the review. On 17 July, 2019 I delivered judgment in the application (Body Corporate for Sanderling at Kings Beach v Samsakopoulos [2019] FCCA 2133). I ordered that the orders made on 1 November, 2018 be set aside and the creditor’s petition be dismissed. On the basis of depositions made by the applicant relied upon at the hearing before the Registrar and before me, I found that the debt upon which the applicant relied was less than the statutory minimum of $5,000.00. Moreover, the applicant had not complied with all of the requirements of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), nor discharged the onus of proving that on the balance of probabilities the respondent owed to the applicant an amount in excess of $5,000.00.
Upon the delivery of judgment, no order was made and none was sought, concerning the payment of remuneration and the recovery of costs, charges and expenses incurred by Mr Robson in administering the estate.
Consideration
At the hearing of the review application before me Mr Robson appeared for the purposes of making submissions to assist the Court. He suggested that whilst the respondent was cash poor, she had more than sufficient assets to discharge all of her liabilities. He suggested that if one of her assets was sold, there would then be an annulment of the bankruptcy by operation of s.153 of the Bankruptcy Act. But he did not urge that an order for annulment be made.
I ordered the sequestration order be set aside. No party, including the trustee argued that it was appropriate to annul the bankruptcy. Mr Robson now asks for the orders set out above. They are not costs orders, but rather orders for the payment of his the remuneration, costs and expenses of administering the former bankrupt estate.
The Bankruptcy Act is silent as to the recovery of remuneration and costs, charges and expenses incurred by a trustee of a bankrupt estate when a sequestration order is set aside. The absence of such provision has led courts exercising jurisdiction under that Act to determine that the trustee has no entitlement to the recovery of remuneration and costs, charges and expenses incurred by trustee in such circumstances: Rangott v Marshall (2004) 139 FCR 14; Kyriackou v Shield Mercantile Pty Ltd (No 2) [2004] FCA 1338; deRobillard v Carver (2007) 159 FCR 38; Pattison v Hadjimouratis (2006) 155 FCR 266. In the event that a sequestration order is set aside, the former trustee in bankruptcy is left to his right of recovery at general law: Pattison at [238] citing Adsett v Berlouis (1992) 37 FCR 201 at 209-10; Flint v Richard Busuttil & Co Pty Ltd (2013) 216 FCR 375 at [49] – [52].
It is against the background of those authorities that Mr Robson argues that this Court might order the payment of his remuneration by the respondent or the petitioning creditor or both pursuant to s.104(3) of the Federal Circuit Court of Australia Act 1999 (Cth).
Subsections 104(2) and 104(3) provide:
(2) A party to proceedings in which a Registrar has exercised any of the powers of the Federal Circuit Court of Australia under subsection 102(2) or under a delegation under subsection 103(1) may:
(a) within the time prescribed by the Rules of Court; or
(b) within any further time allowed in accordance with the Rules of Court;
apply to the Federal Circuit Court of Australia for review of that exercise of power.
(3) The Federal Circuit Court of Australia may, on application under subsection (2) or on its own initiative, review an exercise of power by a Registrar under subsection 102(2) or under a delegation under subsection 103(1), and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised.
Mr Robson argues that the emphasised words in s.104(3) supplies the necessary power to make the orders that he seeks in this application. His argument has not been considered before in this Court. To make good his argument, he points to the decision for Full Court of the Federal Court of Australia in Flint v Richard Busuttil & Co Pty Ltd (above). That case concerned an appeal against the making of sequestration order. For reasons that are not presently relevant, the appeal was allowed and sequestration order set aside. The question arose as to the payment of the remuneration and expenses of the successful appellant’s trustee in bankruptcy. The Full Court said:
48. It follows that the appeal should be allowed. Ms Flint applied for an order setting aside the sequestration order. The trustee asked to be heard on the question.
49. The trustee was given leave to intervene as a party to protect his position. He submitted that an order annulling the bankruptcy should be made under s 153B of the Bankruptcy Act in order that his costs and remuneration be protected in accordance with s 154. If the sequestration order were set aside, the creditor’s petition dismissed and no order annulling the bankruptcy made, the authorities reveal that the trustee would have no statutory basis for any remuneration and his action (and the consequences thereof) would be left to the general law: see the discussions in Austral Brick Company Pty Ltd v Daskalovski [1998] FCA 782, Symons v Bateman [1999] FCA 658, Kyriackou v Shield Mercantile Pty Ltd (No 2) [2004] FCA 1338 (“Kyriackou”) and Pattison v Hadjimouratis (2006) 155 FCR 226 (“Pattison”). The exposure of the trustee to that position in this case would be a gross injustice, as we later explain.
50. An order for annulment would provide a simple means of enabling the trustee to recover his costs and remuneration in the administration of the bankruptcy. Ms Flint opposed the making of such an order on the ground that it is not possible to annul an order which was made without power.
51. Still, in Pattison the Full Court (by majority) held that it was open to the court to make orders both setting aside a sequestration order and annulling the bankruptcy. No party in this appeal contended that Pattison was wrongly decided and the course it sanctioned appears to be within the terms of s 153B.
52. The difficulty with adopting this course in the present case, however, is that it would place the totality of the burden of the trustee’s costs and remuneration on Ms Flint. For the reasons that follow this would be an unjust outcome.
After considering the position of the successful applicant (the former bankrupt) and the petitioning creditor, the Full Court said:
55. In these circumstances, the preferable course is to set aside the sequestration order and dismiss the petition, but to make consequential orders dealing with the costs and remuneration of the trustee. No party submitted that such orders were either inappropriate or beyond power. Irrespective of the position under the Bankruptcy Act, all the parties accepted that the Court had power to make them under s 28 of the Federal Court of Australia Act 1976 (Cth).
Section 28(1)(b) of the Federal Court of Australia Act 1976 (Cth) provides that subject to any other Act, on an appeal, the Full Court may, in the exercise of its appellate jurisdiction, amongst other things give such judgment, or make such order, as, in all the circumstances, it thinks fit, or refuse to make an order. Mr Robson argues here that the similarities between s.28(1)(b) of the Federal Court of Australia Act and s.104(3) of the Federal Circuit Court of Australia Act are obvious. If s.28(1)(b) is a sufficient source of power to make the order made in Pattison then s.104(3) is a sufficient source of power for the orders sought here by Mr Robson.
The difficulty with this argument, however, is that the text of s.28(1)(b) Federal Court of Australia Act and s.104(3) the Federal Circuit Court of Australia Act is not the same. Subsection 104(3) contains the phrase “in respect of which the power was exercised”. That phrase, or words to similar effect, do not appear in s.28(1)(b). That text must perform some work.
In Pattison v Hadjimouratis (2006) 155 FCR 226 the issue was whether a Federal Magistrate could consider making an annulment order as well as an order setting aside a sequestration order upon a review of a registrar’s decision to make a sequestration order. The three members of the Full Court took different views, although Nicholson and Jacobsen JJ took the view that it was open to the Federal Magistrate to consider making an annulment order either instead of a sequestration order (Nicholson J) or as well as a sequestration order (Jacobsen J). The third member of the Court, Lander J, concluded that it was not open to the Federal Magistrate to consider making an annulment order at all.
Nicholson J said (my emphasis):
6. It is apparent from the passages in Harris v Caladine (1991) 172 CLR 84 set out in the reasons of Lander J, that it is necessary that the review to be carried out by the Federal Magistrate must be by way of a de novo hearing. A de novo hearing is what r 20.03(a) of the Federal Magistrates Rules expressly requires.
7. When the Federal Magistrates Court, whether on application under s 104(2) of the FMA or on its own initiative, conducts a de novo hearing to review an exercise of power by a Registrar - whether under s 102(2) or under a delegation under s 103(1) – it ‘may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised’: s 104(3). These are not words of restriction.
His Honour summarised the difference of opinion between the other members of the Court as follows:
9. … However, that conclusion does not itself determine that, on an application for a review of the making of a sequestration order giving rise to an existing bankruptcy, it is not open for an accompanying application to be brought for annulment of the bankruptcy in the event of the review succeeding or for a Federal Magistrate to consider the possibility of annulment.
10. It is at this point that the issue in question between the reasons of Lander J and Jacobson J arises. The former considers that the powers provided in s 104(3) of the FMA must be understood ‘in relation to the matter in respect of which the power was exercised’ and so understood in relation to the exercise of the power of review in a hearing de novo. As the review is of the issue whether the sequestration order ought to have been made, he considers that if the Federal Magistrate on review concludes it ought not to have been made it is not open to him or her to annul the bankruptcy. This is said to be because an order of annulment would recognise that a valid sequestration order had been made when the Federal Magistrate had found to the contrary and so would be bound to set the order aside. Consequently, it is said upon the finding that the order should not have been made there would be no scope for the operation of s 43(2) of the Bankruptcy Act whereby it is provided that on the making of such an order the debtor becomes a bankrupt. Nor could s 58(1) of that Act apply whereby the property of the bankrupt vests forthwith in the Official Trustee or a registered trustee. The result is that there would be nothing to which an order of annulment can effectively apply. Jacobson J considers that effect should be given to the broad terms of s 104(3) of the FMA so that annulment is an option. He considers this approach is reflected in the authorities.
11. The point of difference is not an easy one to resolve. However, I am influenced to the latter view by the strength of the statutory provision vesting power in a Federal Magistrate on a review considered in its context. The power of review is provided for in s 104(3) of the FMA. The same section provides for the breadth of power vested in the Federal Magistrate to undertake the review. The scope of those powers is expressed in terms which admit of the making of an order of annulment, subject to annulment being open and appropriate. The critical question is whether the option of annulment is excluded (when there is a finding that the sequestration order ought not to have been made) by the de novo character of the review and the finding. At the point when the Federal Magistrate comes to consider the making of an order he or she will be faced by the existence of a sequestration order and a trustee appointed in the administration of what at that point is still a bankrupt estate. Section 43(2) provides that a bankrupt continues until discharge or annulment. Until the Federal Magistrate makes an order on the review the status of a bankrupt continues. The finding that the sequestration order ought not to have been made does not itself operate to change that status.
12. It is at that time that the statutory powers in s 104(3) of the FMA become relevant. I do not read those powers as being limited by the reference in s 104(3) ‘to the matter in respect of which the power was exercised’. That is, I do not read those words as picking up some limitation from the nature of the review but rather as being descriptive of what ‘any order or orders’ thought fit must generally relate to. In short, the words of the statutory vesting of power evidence an intention of giving the Federal Magistrate the widest possible choice of powers to address the outcome of the review. Even though he or she may have found that the sequestration order ought not to have been made, the status of the bankruptcy is not at that point changed until the making of an order. It is therefore open for the bankruptcy to be annulled if, for reasons appearing before the Federal Magistrate, annulment is a preferable course of action even though the Federal Magistrate has found that it ought not to have been made. Given the breadth of the powers vested by statute, I do not consider that the making of such an order of annulment would be a recognition of the validity of the sequestration order: rather it would be an order to resolve the circumstances found to be in appropriate as the result of a finding to the contrary.
Underlying the issue for determination in Pattison was the principle derived from the authorities I have earlier mentioned to the effect that if a sequestration order is set aside without anything more, a trustee will have no statutory entitlement to his administration remuneration, costs and expenses: per Nicholson J at [20]. Thus, whatever view the majority took about the width of the power in s.104(3) of the FCCA Act, none of the members of the Court took the view that it was wide enough to support the making of an order in the trustee’s favour for his remuneration, costs and expenses. That it was not seen as wide enough to support the making of such an order tells strongly against the trustee’s argument in this case.
Further, I do not think that Flint advances the matter. That case was decided in the appellate jurisdiction of the Federal Court. The terms of s.28(1)(b) lack the phrase I have identified above. I think that is significant. Those words work to impose some limits on the orders the Court can make on a review. In Pattison the limit was recognised by the majority when each acknowledged that consideration of an annulment order only arose if the legal basis for making such an order was otherwise found to exist: per Nicholson J at [14]; Jacobsen J at [58] – [63].
For the foregoing reasons I am not satisfied that s.104(3) of the FCCA Act is a sufficient source of power for this Court to make the orders sought by the trustee. The application must be dismissed.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 15 July, 2020.
Associate:
Date: 15 July 2020
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